The history of CRM -- evolving beyond the customer database

Customer Relationship Management (CRM) is one of those
magnificent concepts that swept the business world in the
1990’s with the promise of forever changing the way
businesses small and large interacted with their customer
bases. In the short term, however, it proved to be an
unwieldy process that was better in theory than in practice
for a variety of reasons. First among these was that it was
simply so difficult and expensive to track and keep the high
volume of records needed accurately and constantly update
them.

In the last several years, however, newer software
systems and advanced tracking features have vastly improved
CRM capabilities and the real promise of CRM is becoming a
reality. As the price of newer, more customizable Internet
solutions have hit the marketplace; competition has driven
the prices down so that even relatively small businesses are
reaping the benefits of some custom CRM programs.

In the beginning…

The 1980’s saw the emergence of database marketing, which
was simply a catch phrase to define the practice of setting
up customer service groups to speak individually to all of a
company’s customers.

In the case of larger, key clients it was a valuable tool
for keeping the lines of communication open and tailoring
service to the clients needs. In the case of smaller
clients, however, it tended to provide repetitive,
survey-like information that cluttered databases and didn’t
provide much insight. As companies began tracking database
information, they realized that the bare bones were all that
was needed in most cases: what they buy regularly, what they
spend, what they do.

Advances in the 1990’s

In the 1990’s companies began to improve on Customer
Relationship Management by making it more of a two-way
street. Instead of simply gathering data for their own use,
they began giving back to their customers not only in terms
of the obvious goal of improved customer service, but in
incentives, gifts and other perks for customer loyalty.

This was the beginning of the now familiar frequent flyer
programs, bonus points on credit cards and a host of other
resources that are based on CRM tracking of customer
activity and spending patterns. CRM was now being used as a
way to increase sales passively as well as through active
improvement of customer service.

True CRM comes of age

Real Customer Relationship Management as it’s thought of
today really began in earnest in the early years of this
century. As software companies began releasing newer, more
advanced solutions that were customizable across industries,
it became feasible to really use the information in a
dynamic way.

Instead of feeding information into a static database for
future reference, CRM became a way to continuously update
understanding of customer needs and behavior. Branching of
information, sub-folders, and custom tailored features
enabled companies to break down information into smaller
subsets so that they could evaluate not only concrete
statistics, but information on the motivation and reactions
of customers.

The Internet provided a huge boon to the development of
these huge databases by enabling offsite information
storage. Where before companies had difficulty supporting
the enormous amounts of information, the Internet provided
new possibilities and CRM took off as providers began moving
toward Internet solutions.

With the increased fluidity of these programs came a less
rigid relationship between sales, customer service and
marketing. CRM enabled the development of new strategies for
more cooperative work between these different divisions
through shared information and understanding, leading to
increased customer satisfaction from order to end product.

Today, CRM is still utilized most frequently by companies
that rely heavily on two distinct features: customer service
or technology. The three sectors of business that rely most
heavily on CRM -- and use it to great advantage -- are
financial services, a variety of high tech corporations and
the telecommunications industry.

The financial services industry in particular tracks the
level of client satisfaction and what customers are looking
for in terms of changes and personalized features. They also
track changes in investment habits and spending patterns as
the economy shifts. Software specific to the industry can
give financial service providers truly impressive feedback
in these areas.

Who’s in the CRM game?

About 50% of the CRM market is currently divided between
five major players in the industry: PeopleSoft, Oracle, SAP,
Siebel and relative newcomer Telemation, based on Linux and
developed by an old standard, Database Solutions, Inc.

The other half of the market falls to a variety of other
players, although Microsoft’s new emergence in the CRM
market may cause a shift soon. Whether Microsoft can capture
a share of the market remains to be seen. However, their
brand-name familiarity may give them an edge with small
businesses considering a first-time CRM package.

PeopleSoft was founded in the mid-1980’s by Ken
Morris and Dave Duffield as a client-server based human
resources application. In 1998, PeopleSoft had evolved into
a purely Internet based system, PeopleSoft 8. There’s no
client software to maintain and it supports over 150
applications. PeopleSoft 8 is the brainchild of over 2,000
dedicated developers and $500 million in research and
development.

PeopleSoft branched out from their original human
resources platform in the 1990’s and now supports everything
from customer service to supply chain management. Its
user-friendly system required minimal training is relatively
inexpensive to deploy.

One of PeopleSoft’s major contributions to CRM was their
detailed analytic program that identifies and ranks the
importance of customers based on numerous criteria,
including amount of purchase, cost of supplying them, and
frequency of service.

Oracle built a solid base of high-end customers in
the late 1980’s, then burst into national attention around
1990 when, under Tom Siebel, the company aggressively
marketed a small-to-medium business CRM solution.
Unfortunately they couldn’t follow up themselves on the
incredible sales they garnered and ran into a few years of
real problems.

Oracle landed on its feet after a restructuring and their
own refocusing on customer needs and by the mid-1990’s the
company was once again a leader in CRM technologies. They
continue to be one of the leaders in the enterprise
marketplace with the Oracle Customer Data Management System.

Telemation’s CRM solution is flexible and
user-friendly, with a toolkit that makes changing features
and settings relatively easy. The system also provides a
quick learning environment that newcomers will appreciate.
Its uniqueness lies in that, although compatible with
Windows, it was developed as a Linux program. Will Linux be
the wave of the future? We don’t know, but if it is,
Telemation’s ahead of the game.

The last few years…

In 2002, Oracle released their Global CRM in 90 Days
package that promised quick implementation of CRM throughout
company offices. Offered with the package was a set fee
service for set-up and training for core business needs.

Also in 2002 (a stellar year for CRM), SAP America’s mySAP began using a “middleware” hub that was capable of
connecting SAP systems to externals and front and back
office systems for a unified operation that links partners,
employees, process and technologies in a closed-loop
function.

Siebel consistently based its business primarily
on enterprise size businesses willing to invest millions in
CRM systems, which worked for them to the tune of $2.1
billion in 2001. However, in 2002 and 2003 revenues slipped
as several smaller CRM firms joined the fray as ASP’s
(Application Service Providers). These companies, including
UpShot,
NetSuite and
SalesNet, offered businesses CRM-style
tracking and data management without the high cost of
traditional CRM start-up.

In October of 2003, Siebel launched
CRM OnDemand in
collaboration with IBM. Their entry into the hosted, monthly
CRM solution niche hit the marketplace with gale force. To
some of the monthly ASP’s it was a call to arms, to others
it was a sign of Siebel’s increasing confusion over brand
identity and increasing loss of market share. In a stroke of
genius, Siebel acquired UpShot a few months later to get
them started and smooth their transition into the ASP
market. It was a successful move.

With
Microsoft now in the game, it’s too soon to tell
what the results will be, but it seems likely that they may
get some share of small businesses that tend to buy based on
familiarity and usability. ASP’s will continue to grow in
popularity as well, especially with mid-sized businesses, so
companies like NetSuite, SalesNet and Siebel’s OnDemand will
thrive. CRM on the web has come of age!